Re-assessment order quashed under Section 148A for violating natural justice with inadequate response time

The Jharkhand HC quashed a re-assessment order under Section 148A, finding it violated natural justice principles. The petitioner received only two days to respond after receiving the Investigation Report, which was initially not supplied with the show cause notice dated 24.02.2024 but provided later on 17.03.2024. Despite new facts being introduced on 20.03.2024, the respondent failed to grant the statutory minimum seven days for reply. The HC held the proceedings were conducted in undue haste, constituting arbitrariness and violating Section 148A provisions. Both the re-assessment notice under Section 148 and the impugned order were set aside.

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Issues:
Violation of principles of natural justice in re-assessment proceeding under Section 148A of the Income Tax Act, 1961.

Analysis:

The petitioner challenged the order passed by the 3rd Respondent under Section 148A (d) of the Income Tax Act, initiating re-assessment proceedings for the Financial Year 2018-19. The petitioner contended that the notice issued did not comply with the principles of natural justice and was in undue haste. The petitioner was accused of benefiting from alleged bogus entries, cash withdrawals, and time deposits without proper disclosure of sources. The petitioner requested copies of the Investigation Report, which were not provided in a timely manner, leading to a rushed response deadline. The 3rd Respondent added new allegations regarding a time deposit, further complicating the case. Despite requests for more time to respond, the 3rd Respondent proceeded hastily and issued the impugned order for re-assessment. The High Court found the actions of the 3rd Respondent to be arbitrary and in violation of natural justice principles.

The Court emphasized that actions taken in undue haste can be considered arbitrary and unacceptable in law. The failure to provide adequate time for the petitioner to respond to new allegations and the rushed nature of the proceedings were highlighted as key issues. The Court noted that the 3rd Respondent did not follow the statutory provisions of Section 148A, which require providing sufficient time for the assessee to respond. The introduction of new facts in the notice on 20th March 2024 necessitated a reasonable time for the petitioner to reply, which was not granted. The Court concluded that the 3rd Respondent's actions were in violation of natural justice principles and statutory provisions.

The Court quashed and set aside the impugned order and notice issued by the 3rd Respondent, citing the violation of natural justice and statutory provisions. However, the 3rd Respondent was permitted to initiate fresh proceedings strictly following the provisions of Section 148 of the Act. The Court acknowledged the petitioner's unnecessary harassment and imposed a cost of Rs. 50,000 on the 3rd Respondent to be paid to the petitioner. The writ petition was allowed, and any pending applications were disposed of accordingly.

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